AOL CEO Backpedals On Benefits Change

AOL, Inc. (NYSE:AOL) CEO Tim Armstrong restored the companies previous retirement benefits, which included making matching 401(k) payments every pay period instead of once per year as Armstrong had proposed, in the face of public and employee outrage.

Mother of ‘distressed baby’ writes scathing editorial blasting AOL

Armstrong had originally said that the cuts needed to be made to make up for costs from Obamacare and two “distressed babies” that he said cost the company $1 million in health care costs. One of the mothers, Deanna Fei, wrote an article in Slate that quickly went viral expressing her outrage over Armstrong’s comments.

“I take issue with how he reduced my daughter to a ‘distressed baby’ who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting,” Fei wrote. While she acknowledges that AOL, Inc. (NYSE:AOL) has generous benefits that took care of her family in a time of need, there’s no mistaking the tone of her article.

Most of the backlash has been over Armstrong’s “distressed babies” comment, but even if he hadn’t made that gaffe, the attempt to blame Obamacare probably would have been about as unpopular. At the end of 2012 Papa John’s, Denny’s, and Applebees all said they would have to cut employee hours to handle Obamacare costs and saw public perception of their brands take a dive. Even though people are skeptical of the new health care law, using it as an excuse for cost-cutting measures doesn’t seem to fly.

No comparable outrage over similar IBM decision

Ironically, almost no one noticed the change in policy when it was first announced (a Washington Post article came and went without creating a stir), and while the internal backlash may have still played out it’s hard to imagine such a media frenzy over a dry change to employee benefits. International Business Machines Corp. (NYSE:IBM) made the same change a year ago without much fanfare, and without making their brand reviled by consumers. Apparently the public understands the need to keep costs under control, but doesn’t like it when you scapegoat babies and sick people in the process.